CLAYTON, Mo. (CN) - A class action claims Edward Jones' revenue-sharing with its insurance partners creates a conflict of interest for the investment manager.
Lead plaintiff Daniel Ezersky sued Edward D. Jones & Co. dba Edward Jones, in St. Louis County Court.
Ezersky claims Edward Jones representatives do not take all factors into account, but seek to maximize profits when determining the amount and cost of universal life insurance.
Edward Jones uses a number of computer programs to recommend the proper amount of life insurance for a client, the complaint states.
One such tool is the Life Insurance Needs Calculator, which does not take into account Social Security survivor benefits, Ezersky says in the complaint.
Another calculator, the FAST Survivor Tool, does take Social Security survivor benefits into account.
"When Edward Jones brokers utilize the FAST Survivor Tool, the recommended life insurance coverage is smaller - and is therefore associated with the client being charged a smaller premium - than when brokers rely on a methodology (such as the online Life Insurance Needs Calculator) that does not take Social Security survivor benefits into account," the complaint states.
Ezersky claims that though it does not cost Edward Jones to use the FAST Survivor Tool, Jones reps seldom use it and often do not tell clients it is available.
"There likewise is no extra cost to Edward Jones to use the FAST Survival Tool, except indirectly by virtue of the lower premiums that clients who accept the FAST Survival Tool recommendation pay, in turn resulting in smaller commissions paid to Edward Jones and possibly lower 'revenue sharing' payments," the complaint states.
Edward Jones received $58 million in revenue sharing payments from its insurance partners in 2012, according to the complaint.
Ezersky claims he bought a universal life policy from Edward Jones worth $435,000 using the Life Insurance Needs Calculator. He says he was not informed of the FAST Survivor Tool option and that as a result, Edward Jones recommended to him 50 percent more life insurance than it would have been otherwise.
He seeks certification of two classes.
The first class consists of all Missourians who bought universal life insurance from Edward Jones who were eligible for Social Security survivor benefits, but were not recommended an amount of insurance based on the FAST Survivor Tool.
The other class, which seeks an injunction, consists of all Missourians who have beneficiaries eligible for Social Security survivor benefits at the time of buying term, whole life or universal life insurance from Edward Jones.
Ezersky class seeks disgorgement of profits and actual and punitive damages for breach of fiduciary duty, unjust enrichment and violation of the Missouri Merchandising Practices Act.
He also wants Edward Jones enjoined from recommending an amount of term, whole life or universal life insurance without informing clients of the availability of the FAST Survivor Tool.
He is represented by Robert W. Schmieder II, with SL Chapman, in St. Louis.Follow @@joeharris_stl
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